What You Don't Know In A Divorce Might Hurt You: The Three Biggies

Contractual Obligations, Child Support and Income Withholding, and COBRAUnlike the larger body of civil law, domestic relations has mostly grey statutory provisions that are equitable as much as they are legal. The reason for this is life is anything but organized and linear. It is messy and filled with emotions ranging from happy to sad. A trial court, by default, is left to solve financial-to-legal problems that appear to have no answers, or in fact, have no answers.

By all accounts, Indiana’s trial courts and their judges, commissioners, magistrates and judge pro tempores do a remarkable job. Sometimes the parties help a great deal by devising their own potential resolutions. Take the marital home in a tight residential market (i.e., post-collapse of the real estate bubble). In one case, the parties agreed to remain in the home until it sold post divorce.

Nevertheless, the very broad discretion (or authority) given to trial court judges does have its limitations. At Ciyou & Dixon, P.C., by this blog post, we share the most problematic limitations with you. Our belief has long been the more educated a litigant is about the process, the better job he or she can do in defining and refining her or his legal objectives.

No where is this more important than with understanding what limits a trial court judge faces in what can be ordered. With a concerned and educated litigant and skilled lawyer, alternative courses may be considered, negotiated and/or tried to attempt to minimize such limitations, which occur as it relates to certain contractual obligations, child support and income withholding orders, and COBRA.

As it relates to contracts, a trial court in a divorce case does not have the general power to undo contracts a couple has entered into with a third party. A classic example is a newer car, jointly financed, that has a negative worth. Simply put, a trial court does not have the jurisdiction over the third party (a bank or credit union generally) to undo the loan and security agreement and effectively force the lender to take the car back to make a clean break on a divorce.

However, a trial court may set over “X” amount of money to a spouse who is awarded the car to address the fact of its negative position. Alternatively, a trial court may order the party who is best able to afford the car and its payment to take such and hold harmless and indemnify the other spouse for its liability.

This means that the other party cannot be held liable by the other spouse for this debt effectively so long as he or she has the ability to pay this debt. However, under the Supremacy Clause of the United State Constitution, federal law is supreme to state law.

This creates the situation where a bankruptcy filing by the spouse ordered to take the car may shift this debt solely to the other party by the bankruptcy. The lender still has the other party liable to pay under the loan agreement, and federal bankruptcy law may allow this divorce debt to be discharged by the party ordered to accept it.

The point is not to view these problems as insoluble, but instead consider the permutations of each component of the divorce and settle or put on trial evidence to minimize such risks. Is there an account to off set this potential loss? Should the trial evidence advocate the other spouse take this marital debt?

The key is understanding such limits. Another common situation involving a contract that a trial court cannot undo is represented in the devaluation of homes and loss of equity by the collapse in housing prices.

A second “biggie” where parties may agree in fact agree, but a judge rejects such, is with “funky” agreements as to child support and direct payment of child support or in-kind payment. Under the Child Support Rules and Guidelines and other laws, the child support belongs to or goes to the benefit of the child(ren).

Parents are not free to agree to a weekly child support payment that is not determined by application of the Rules and Guidelines. However, where parents may elect to do so, or a court believes it is appropriate, the rationale for the deviation from the weekly support may be allowed if there is a written reason for doing so.

It is therefore critical to understand this limit and trial court’s authority to reach an agreement in harmony with the Rules and Guidelines or put on evidence so a court may deviate on what is presented. In addition, due to federal dictates, the trial court is required to enter an income withholding order for child support, and direct payment spouse-to-spouse is not allowed without a showing of good cause.

Again, much as with contracts, there are ways to navigate a legal course to address limits a trial court may have in reaching a just property division and child support that is in the children’s best interests. It is thus incumbent on the litigant by his or her attorney to understand and prepare for these limits to obviate any problem it may cause.

Finally, health insurance is generally an important topic to parties in a divorce. Since the passage of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), if you become ineligible for health benefits by divorce, the employer must allow you to continue to obtain health insurance at the actual cost of the insurance under its group rates. However, this is expensive and generally last only 18 months.

Therefore, if there are health concerns or the cost of the COBRA insurance is high, it is that much more important to address this matter while the divorce pends. With a chronic condition, for example, the other spouse may be ordered to pay maintenance (roughly a type of alimony) after the divorce is final or you may be able to obtain a larger portion of the net marital estate (what you have minus what you owe), if you negotiate for it or put on the requisite evidence at trial.

This is a way to avoid what occurs if COBRA is not affordable or when it runs out.

Understanding the limits of how a divorce court judge may be able to help you address issues in your case is the first step in preparing for an alternative way to solve an actual or theoretical problem. The way to do this is to determine the bad or worst outcome and ask “what if”? If this is not acceptable, an alternative legal hedge must be negotiated or advocated for.

If this blog post has helped you think about the limits of what a divorce court may order and how it may impact you, it has met its objective. Ciyou & Dixon, P.C. advocates practice throughout the state of Indiana. This blog post was written by Bryan L. Ciyou, Esq.

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Need to talk now? Fill out the quick form below and we will contact you directly.

Your Name*

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Message:*

Fee For Consultation*

I understand that if I book a consultation with Ciyou & Dixon, P.C. there is a $250 consultation fee. There is no financial obligation to inquire about our services, however, know that if you do book an appointment, there is a $250 consultation fee payable at your first meeting.

Based in Indianapolis and founded in 1995, Ciyou & Dixon, P.C. is a niche law firm focused on successfully dealing with the complexities of divorce, high-conflict child custody and family law. Known for their ability to solve extremely complex situations with high quality work and responsiveness, Ciyou & Dixon will guide you every step of the way. The family law attorneys at Ciyou & Dixon, P.C. will help you precisely identify your objectives and the means to reach your desired result. In addition, this practice focus is augmented by the firm's other three core areas, namely appellate advocacy, civil practice, and firearms law. Life is uncertain. Be certain of your counselSM.